IEDC: When the last grocery store closes, cooperatives can step in

By Robert Pillow, IEDC intern, University of Arkansas

As more small-town grocers go under, rural Americans face food insecurity along with stretched budgets and commutes. High operating costs and competition from national chains are forcing sole proprietors to innovate. Grocers are experimenting with various forms of cooperatives (co-ops), which can work well for rural communities.

Whether maintaining an existing store or launching a new venture, it is important to choose the right model for the community. An interesting strategy, and one that requires regional thinking, is a purchasing co-op, in which multiple stores leverage their purchasing power to buy in bulk for lower prices. Of course, rural grocery stores are dispersed by nature, but those within reasonable distance can coordinate on larger orders and thereby lower their overhead.

The co-op concept applies to ownership as well. Thompson stressed four key characteristics of any successful co-op: community support, a business plan, experienced management, and sound financing.

The most important step is to amass community support; without a grassroots effort and widespread buy-in, the project will die on the vine. Neither is it likely to succeed if the project’s champion comes from outside of the community. Forging links to local farmers or community groups may increase community interest.

Just because a co-op doesn’t look like a traditional business doesn’t mean it can go without a traditional business plan. Any sustainable co-op requires a rigorous plan with budget projections, as well as purchasing and sales estimates.

Sound management also is critical. Though hiring a local manager would be a great bonus, it is more important to hire someone with experience. The Renaissance Community Co-op in Greensboro, North Carolina, hired an experienced manager a full year before opening.

It’s not uncommon for a grocery store to operate a full year before returning a profit, which is why stable financing is so important. Cooperatives rely on community members literally buying into the concept, but they also typically rely on loans and grants from local, state, and federal sources, as well as community development financial institutions. The Greensboro co-op secured low-interest loans to be paid back only through profits, which allowed the store to establish itself without a looming debt obligation.